Katz clinches oilers deal

EDMONTON - Daryl Katz has taken steps to keep the Oilers here
for the long term, prompting the Edmonton Investors Group's board of
directors to reverse its stance and urge its 34 shareholders to
accept the local billionaire's $200-million offer for the team.

EDMONTON - Daryl Katz has taken steps to keep the Oilers here for the long term, prompting the Edmonton Investors Group's board of directors to reverse its stance and urge its 34 shareholders to accept the local billionaire's $200-million offer for the team.

"After many meetings and hours of consideration, the Board ... has decided to recommend to the Shareholders acceptance of the Offer," chair Bill Butler wrote in a letter sent Saturday to the ownership group.

The dramatic development follows a Friday proposal from Katz to Mayor Stephen Mandel for a location agreement that will ensure the Oilers stay in Edmonton.

The desire for an agreement was on a short list of considerations the EIG board forwarded to Katz last week as they continued negotiating the sale of the National Hockey League team.

The Journal has obtained a copy of a return letter sent to Katz by Mandel, who thanks the Rexall pharmacy tycoon for initiating a discussion aimed at finalizing a location agreement once the Oilers are sold.

"Knowing your dedication to this city, I am not surprised by your willingness to enter into an agreement to guarantee a long-term future for the Oilers in Edmonton," Mandel wrote on Friday.

"I know this would be reassuring to Edmontonians who have demonstrated a long-term dedication to the team themselves.

"Should you conclude your negotiations successfully, I would be happy to involve our City Manager and sit down with you to discuss this Agreement."

Success is guaranteed in the wake of the board recommendation. The only question remaining is how many of the 7,492.5 EIG shares Katz will obtain at $22,000 per unit.

"If not 100 per cent, close," said one member of the investors group.

Neither Butler nor Katz Group spokesperson Josh Pekarsky could be reached for comment on the board recommendation, which represents a reversal.

The six-member board had objected strongly to Katz's fourth offer of $188 million; and five of them had actively supported the so-called Plan B corporate repurchasing option. Those directors -- Gary Gregg, Butler, Chris Kuchar, Jakob Ambrosius and Brian Nilsson -- hold 22 per cent of the company's shares.

See KATZ / A2

Their opposition to Katz's offer had stymied his attempt to buy at least 90 per cent of company shares, the threshold at which a sale is deemed compulsory under the Corporations Act of Alberta.

Katz effectively turned the bidding war in his favour when he upped the ante with a formal offer of $200 million on Jan. 28. Plan B proponents, who may have been well short of the necessary funding to buy out their fellow investors at $188 million and $20,687 per share, took their initiative off the table. At the same time, the board committed to negotiating with Katz in advance of his Tuesday deadline, provided he addressed some major concerns. These included confirmation of the purchase price of each share and that all shareholders be treated equally, legal issues regarding terms of the sale and -- most importantly -- Katz's commitment to keeping the Oilers in Edmonton.

The location agreement was raised several times during the negotiations, which started in earnest after Katz offered $188 million on Dec. 13 and then-chair Cal Nichols publicly endorsed the sale.

Butler called the location agreement "bedrock for us" during a Jan. 2 press conference that was clearly aimed at casting aspersions on Katz's offer of $188 million. Butler said the EIG's legal counsel reviewed the offer and recommended shareholders not accept it "in any way shape or form," primarily because there was no mention of a location agreement.

The EIG stance seemed disingenuous, since its own location agreement lapsed in 2004. What's more, a January letter from Katz Group lawyer John Karvellas made it clear Katz believed a location agreement between EIG and the city was still in place.

"Daryl Katz does not intend to relocate the Edmonton Oilers away from Edmonton," Karvellas wrote. "By acquiring the shares of the company, he inherits the current agreement."

When it was made clear no agreement existed, the issue became a bargaining chip for both sides as they worked hard to reach a deal the board could recommend to shareholders prior to Tuesday deadline for closing the sale.

Board members met with representatives from Rexall Sports Corp. twice last week and three additional times on their own. Though some of their concerns were not addressed -- and the offer isn't "perfect," according to Butler -- the board took into account the overwhelming support for Katz from ownership members who have already transferred their shares to him.

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